Biz Bits: Ways to keep your small business tax-healthy

Thursday

May 26, 2011 at 12:01 AMMay 26, 2011 at 6:45 AM

Weekly business rail, with tips on how to keep your small business tax-healthy, BBB advice on driving schools and more.

Tip of the Week

To succeed, many small-business owners take on multiple duties. Among the more challenging responsibilities is taxes. "Thankfully, you don't have to be an accountant to be tax-savvy," says Jessi Dolmage, spokesperson for TaxACT. "Just knowing where to go for information, keeping secure records and using robust tax software helps maximize business tax savings."

- Budget for tax deadlines to avoid cash flow disruption and meet deadlines to avoid penalties. Most self-employed people should complete Form 1040-ES to calculate and pay quarterly estimated tax payments. Corporations must also pay estimated payments if they expect to owe taxes of $500 or more. Businesses with employees are subject to different forms and deadlines based on business type and revenue - i.e. Forms 940, 941 and 944. Corporations and S-corporations must file annual 1120 and 1120S tax returns by March 15.

- Define and pay labor properly. Employees require different paperwork than independent contractors. Withhold income, Medicare and Social Security taxes from employee paychecks and pay Medicare, Social Security and unemployment taxes for them. Conversely, issue independent contractors a 1099-MISC form if payments total $600 or more in a calendar year.

- Get familiar with small-business tax benefits. For 2011, the deduction for business start-up costs is worth twice as much and phases out at a higher amount. Legislation also extended the increased deduction amount, phase-out limit and definition of Section 179 property. First-year bonus depreciation was also extended. For property placed in service after Sept. 8, 2010, and before Jan. 1, 2012, bonus depreciation is 100 percent. The Small Business Jobs Act of 2010 included a deduction for health insurance premiums when calculating self-employment tax. Self-employed individuals can deduct 100 percent of health insurance costs for themselves, their spouse and dependents. Visit irs.gov and click on "Businesses" for information about these and other business tax breaks.

- Remember tax law changes often. Stay in the know by signing up for small-business e-mail updates at irs.gov.

- Keep financial records current. Updated records translate into timely financial statements, which make for easier tax preparation. Scan or keep original receipts for updating monthly books or returning items. They may also be helpful in the event of an Internal Revenue Service audit.

- Track deductible expenses. Whether you deduct actual vehicle expenses or use the standard mileage rate (51 cents per mile in 2011), keep detailed documentation including mileage and purpose. Detailed logs should also be kept for travel expenses and business use of your home. Documenting takes time and effort, but the deductions are worth it.

- ARA

BBB Watch

The Better Business Bureau urges parents and students to make smart, informed decisions when choosing a drivers’ education course.

The Better Business Bureau has received more than 2,000 inquiries in the past two years about driving schools. The BBB also received varied complaints ranging from no-shows to bad customer service and sales practices.

The BBB recommends the following when choosing a driving school:

- Research first. For information on driving schools in your area, start your search at www.bbb.org for free BBB Business Reviews that will help you make informed decisions.

- Ask around. Call several schools to find out about the course schedules, fees and registration procedures offered. Remember, price is not the sole factor in choosing a driving school. You must compare instructional quality, class size and behind-the-wheel lessons.

- Visit the driving school. Ask to see classrooms and if you could observe part of a course and ask to see the course book to ensure it's up to date. The ideal course integrates both behind the wheel and classroom training. Remember that the fastest course is not always the way to go.

- Check the details. Find out if the school has a policy on make-up classes and refunds. Always read the terms and conditions on enrollment forms and contracts. Also, check to see how the school resolves its complaints.

The List

According to a report by Forbes, here are baseball’s most underpaid players: